Analysing Bosch Limited: A Century in the Spotlight!

There's this saying I came across: "Success is not just about making money; it's about making a difference." Pretty deep, right? Well, it perfectly captures what some companies are all about- going beyond the money game to really leave a mark. Today, we will talk about Bosch Limited, a company that's been doing just that for a century.

This isn't your typical business story- Bosch Limited isn't just about nuts and bolts but an innovation trailblazer, standing out not just for its cool tech but for how it's made a positive impact on our everyday lives.

Let’s know more about Bosch Limited, where smart engineering meets compassion, and every invention brings progress.

Inside Bosch: What Makes Them Tick?

Bosch Limited is the primary entity for Robert Bosch in India, and it's quite a versatile player in various sectors. It has got its hands in automotive technology, industrial tech, consumer products, and energy and building technology.

The company manufactures and sells things like diesel and gasoline fuel injection systems, aftermarket parts for vehicles, industrial equipment, power tools, security systems, and a range of energy products and solutions.

In key areas like Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology, Bosch stands out as a significant provider of both technology and services. 

➡️ Notably, they've got the biggest development facility for end-to-end engineering and tech solutions outside of Germany, right here in India.

Breaking it down, Bosch operates mainly through three business verticals.

 

So, whether you're talking about getting around, things at home and in the industry, or the tools of the trade, Bosch has got a finger in each pie.

Let's talk about the revenue boost to begin with.

Bosch's Toolbox: Breaking Down the Basics

Let's examine the sector-wise sales performance. Please refer to the image below and then review the accompanying description for a clearer understanding.

Mobility Solutions (BBM)

• Global Leader Goal: Bosch aims to lead the diverse powertrain industry globally. 
• Comprehensive Coverage: From electric vehicles to passenger and commercial automobiles, and even off-road vehicles.
• Aftermarket Division: Provides technologies for car diagnostics and repair services across India.
• Replacement Parts and Solutions: Offers a range of auto parts like fuel injection equipment, spark plugs, braking parts, and filters.
• Diverse Product Range: Includes Bosch-made and other manufacturer products like batteries, starter generators, lubricants, comfort electronics, and wiper blades.

Consumer Goods (BBG)

• Division Focus: Primarily centres on power tools, power tool accessories, and measurement equipment.
• Target Audience: Serves professionals in trade and industry, along with the DIY market and hobbyists.
• Diverse Product Selection: Offers a wide range of products to cater to different needs.

Energy and Building Technology (BBE)

• Advanced Technologies: Focuses on developing advanced security, safety, and communications technologies.
• Infrastructure and Commercial Applications: Aimed at enhancing security in infrastructure and commercial settings.
• Portfolio Highlights: Video surveillance, intrusion detection, fire detection, voice evacuation systems, and access control and management systems.
• Energy & Building Solutions: Concentrates on energy efficiency initiatives.
• Target Industries: Specifically targets pharmaceuticals, fast-moving consumer goods, and healthcare for energy-saving solutions.

Now, let’s talk about numbers…

Bosch Ltd. Financial Analysis

If we look at how the sales have been doing, it might seem like the revenue has been growing kinda slow, at around 5.4% every year for the past 5 years. And, well, the profits? They've been on a bit of a decline, dropping by about -2.8% each year.

But hold on!

When we zoom in on the last three years, especially post-COVID, things get interesting. The revenue has actually been shooting up at a pretty impressive rate of 24% annually, and what about profits? Well, that has been growing like crazy at 72% during the same period.

Now, what does all this mean? 🧐

It means the profit margins have expanded, which is a good thing. Basically, the company is making more money compared to its costs.

Looking at the sales numbers for each quarter, BBM sales have gone up by 11.7% compared to the same time last year, and there's a slight 0.4% increase from the last quarter. Moving on to the BBG sector, there's a 10.4% year-on-year boost and a more noticeable 3.9% increase since the last quarter.

Now, for BBE, which doesn't bring in as much revenue, there's a growth of 3.9% compared to last year, but it's dipped by -3.7% from the last quarter.

Now,

Looking at the company's expenses, they were 88.5% of the revenue in FY21 and have now come down a bit to 87.9%. This shift has bumped up the Operating Profit Margin from 11.45% in FY21 to 12.08% in FY23.

Now, after all these quantitative analyses, let’s not forget the qualitative aspect and let’s look at the competitive advantages of the company:

Bosch boasts a solid competitive edge for several reasons.

Bosch Ltd. Competitive Edge: How They Stay Ahead in the Game

Check the pointers below to understand the competitive advantages that this company holds.

Debt-Free Stability:

• Extended Debt-Free Period: Bosch has no debts for a long time.
• Robust Cash Flow: Strong free cash flows contribute to financial stability.
• Growing Cash Reserve: Accumulating cash reserves enhances financial strength.
• Market Opportunities: Enables quick capitalisation on market opportunities.

Adaptation to Regulatory Changes:

• BS IV to BS VI Shift: Bosch benefits from India's shift to higher emission standards.
• Technology Leader: Well-placed to meet emission standard adjustments.
• Electric Vehicle Venture: Bosch ventures into supplying electric vehicles.
• Embracing Connected Technologies: Adapting to the rise of connected vehicles.

Aftermarket Dominance:

• Strategic Network: Bosch strategically places aftermarket and repair shops across India.
• Comprehensive Services: Offers a wide range of auto diagnostic and repair technologies.
• Spare Parts Availability: Extensive selection of spare parts, especially for cars and two-wheelers.
• Largest IAM Network: Bosch's Automotive Aftermarket sector leads as India's largest Independent Aftermarket network.
• Market Expansion: Actively expands dealer network and focuses on tier-2 aftermarket sales.

While Bosch enjoys strengths, it also faces certain risks:

Playing it Safe: Bosch's Risky Business

1. Intense Competition:

• Potential price pressures and market share risks
• Challenges managing increased import content

2. Dependency on Auto Industry:

• Heavy reliance on automotive sector revenue
• Vulnerable to industry slowdowns

3. Rising Raw Material Costs:

• Upward trajectory in raw material expenses
• Profit margins are at risk if costs can't be passed on

4. Electric Vehicle Market Dynamics:

• Preparing for the future with 80% internal combustion engine market share by 2030
• Rapid growth in electric vehicles poses a potential challenge

Who Owns What: Bosch's Shareholding Pattern

Now, here's a neat trick to double-check our analysis- follow the money trail. I'm talking about where the big players, the institutions, are putting their stakes.

Between September 2021 and September 2023, while, 
Foreign Institutional Investors (FIIs) decreased their ownership from 4.04% to 3.56%; 
Domestic Institutional Investors (DIIs) increased theirs from 16.1% to 17.04%. 

When you combine them, the overall ownership by FIIs + DIIs increased slightly from 20.14% to 20.6%. This indicates that big institutions still have confidence in this company.

The Bottom Line

In the world of gears and gadgets, Bosch stands tall as more than just a company- it's a narrative of resilience, innovation, and adaptability. 

From the nuts and bolts to the web of financials, Bosch's story is a testament to the art of not just surviving but thriving in the ever-evolving business landscape. 

So, as we bid adieu to this exploration, let's keep an eye on Bosch, where every invention is a chapter in a tale that keeps progressing. Here's to the gears that keep turning, the innovations that keep sparking, and a future where Bosch continues to drive change. 

Cheers to the century-old legacy of engineering with heart!

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Insider by Finology and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.